Investment process

The investment process consists of four phases:

• Origination;
• Prescreen;
• Due Diligence / Document Review;
• Investment Committee Approval.

Origination
Saratoga Partners has longstanding relationships with middle market and broadly syndicated loan originators and private equity firms.  Saratoga Investment leverages these relationships to source investment opportunities.  In addition to these relationships, sources of origination include:

• Reciprocal deal flow;
• Junior capital alliances with select first lien lenders; and
• Direct calling on private equity sponsor groups.

Prescreen
After originating an investment opportunity, Saratoga Partners industry credit analysts prepare a prescreen to present the investment opportunity to senior members of the transaction team.  The pre-screen is the initial opportunity to evaluate the potential investment.  The pre-screen covers the following topics:

• Company overview;
• Examination of the company’s historical financial performance;
• Analysis of the company’s capital structure;
• Comparison of the investment opportunities risk / return profile;
• Review of the company’s equity sponsor;
• Discussion of the investment’s merits and risks.

Due Diligence / Document Review and Approval
Following the approval of the prescreen, a formal due diligence process is initiated during which the credit analyst prepares a full analysis of the investment opportunity.  Key aspects of the due diligence process and analysis include:

	The company
In person meetings with management, and financial sponsors; Analysis of historical financial performance and cash flow characteristics; Review of balance sheet ratios; Comparison of comparable valuation multiples; and Engagement and/or review of third party diligence reports.
	The industry and competitive dynamics
Strengths, weakness, opportunities and threats analysis; Comparison of the Company’s position with in the competitive landscape; Analysis of the technological and geographical forces shaping the industry; Review of the drivers of growth and costs within the industry; and Conversations with competitors, suppliers and customers.
	The capital structure and security specific analytics
Review of security position within the capital structure; Negotiation of credit documentation and covenant levels; and Capital structure sensitivity analysis based on projected performance.
Upon completion of the due diligence process the investment team presents a complete credit analysis to the Company’s Investment Committee.